Less than a week after Florida A&M University celebrated a mysterious Texas hemp farmer’s historic donation during its graduation ceremony, jubilation crumbled into a crisis fuelled by scepticism about the donor’s purported wealth and questions about whether the university sufficiently vetted the gift.
The university has now paused the deal while it further assesses the donation’s value, despite earlier claims that it did its “due diligence” before announcing it had $237 million (£190 million) in stock from Gregory Gerami, the 30-year-old founder and chief executive of Batterson Farms Corp and trustee of the Isaac Batterson Family 7th Trust, which underwrote the donation.
“With regards to the gift and the processing of it and so forth, in terms of any future processing, we’ve already decided it’s in our best interest to put that on hold,” FAMU President Larry Robinson said at an emergency meeting of the FAMU Foundation’s Board of Directors on 9 May.
The announcement followed days of criticism from vocal observers, who noted how a quick internet search reveals the limited, amateurish online presence of Mr Gerami’s allegedly highly successful business, as well as news articles about how Mr Gerami previously backed out of a $95 million pledge to ` Carolina University.
In response to the cacophony of questions, Mr Gerami told reporters at a news conference that he expected the $237 million in stocks to be converted to cash by the end of the year. A copy of the signed gift agreement FAMU released to local journalists later in the week shows that Mr Gerami promised the university even more than the university originally announced, agreeing to donate 14 million shares of stock with an intrinsic value of at least $239 million and an additional $61 million over the next decade.
That would make it the largest donation in FAMU’s history – and the largest single donation to any historically black college or university.
But a nondisclosure agreement the university signed meant only a handful of administrators knew about the donation before Mr Gerami delivered the keynote commencement speech, held up a jumbo check next to a beaming Professor Robinson, and declared “the money is in the bank”.
By the 9 May, however, Robinson was far from elated about the gift. “I’ve had better lifetimes,” he said right before the meeting started.
Gift blindsided board
Once the meeting got under way, board members said they were blindsided by the donation.
Chekesha Kidd, a FAMU Foundation board member, said she first heard about the gift when a friend texted her after the graduation ceremony, and that the board didn’t get formal notification about it until the following afternoon.
“That’s very problematic with such a major donation,” she said at the meeting. “How did we get this far without knowledge of the transaction or the donor?”
Shawnta Friday-Stroud, FAMU’s vice president, executive director for university advancement and executive director of the FAMU Foundation, attempted to explain, providing new details about what happened after Mr Gerami approached the university last fall about making a donation.
After numerous meetings with Dr Friday-Stroud, Professor Robinson and Audrey Simmons-Smith, director of development, to discuss Mr Gerami’s philanthropic priorities, “He came up with an amount,” Dr Friday-Stroud recalled.
Mr Gerami then provided a “proof of funds” statement from his bank and the administrators subsequently met with his financial advisers, although he changed financial advisers within two months. But Dr Friday-Stroud said FAMU didn’t meet with those new advisers because by that time, a nondisclosure agreement was in discussion, and Mr Gerami had already decided he wanted to prioritise supporting FAMU’s College of Agriculture and Food Sciences and School of Nursing.
“He asked about speaking at commencement and making the announcement then,” Dr Friday-Stroud said. “Of course, we said no announcement could be made if we did not have the donation.”
But after Spelman College in Atlanta received a $100 million donation in January – at that time considered the largest in HBCU history – Mr Gerami told FAMU he wanted to outdo it.
Before moving forward, Dr Friday-Stroud said the university conducted an in-depth screening of Mr Gerami and uncovered the same content members of the public have since cited to support their scepticism, including a newspaper article from last year about how Mr Gerami backed out of his donation to Coastal Carolina.
She confirmed that A&M officials did not reach out to Coastal Carolina about Mr Gerami – giving the board no further explanation as to why – and proceeded with the deal.
Stock value unclear
Mr Gerami then transferred the stock certificates, reportedly valued at $15.85 a share, to FAMU via an equity management software called Carta. But since the gift agreement doesn’t name a specific company, it’s unclear how the stock was valued. At his news conference, Mr Gerami said he has invested in various agriculture companies, but did not name any specifically.
Dr Friday-Stroud explained that an annual third-party audit is scheduled to begin at the close of the fiscal year at the end of June, and that will be able to provide an accurate valuation of Mr Gerami’s stock alongside all of the university’s other financial holdings.
“Because we were near our year-end, it was decided we would not pay additional money to get [a separate valuation of Mr Gerami’s stock] because it will be a part of our annual financial statements audit,” she said.
But without that valuation, the shares could be worth “$500 million”, said Laurence Humphries, a foundation board member, “or it could be zero”.
Terry Arnold, a FAMU Foundation Board member, asked why the university moved forward with the announcement “given that we still have aspects and several steps of due diligence to verify and validate such a gift”.
Dr Friday-Stroud said that because the gift agreement discussed the transfer of stock, and that stock was delivered, FAMU honoured Mr Gerami’s request to speak at graduation. While the university recognised that the shares could decrease in value after the valuation process, she said that if Batterson Farms goes public there could also be “a potential upside”.
“Yes, there is clearly risk, and we are seeing that in everything that has shaken out,” Dr Friday-Stroud said. “But at the time, that was the decision.”
The review of the circumstances that led to FAMU’s acceptance and announcement of Mr Gerami’s donation without verifying its worth will continue.
At the close of the meeting, the foundation’s board passed a motion for an external audit of the foundation’s processes for evaluating and receiving major gifts; the university’s own Board of Trustees has also scheduled a special meeting for this week.
“Serious concerns have been raised regarding the validity of the gift, the adequacy of the due diligence processes and whether the Foundation Board and Board of Trustees have been provided ample oversight opportunity. I regrettably share these concerns,” Kristin Harper, chair of the board of trustees, said in a statement on 10 May. “We will get to the bottom of this.”
But it appears Ms Harper was one of the few people who knew about the donation before the public announcement because her signature is one of six on the gift agreement. Right after the graduation ceremony she held back tears, telling reporters that Mr Gerami’s “transformative” gift was “almost unbelievable”, The Tallahassee Democrat reported.
‘More red flags than the CCP’
Two Florida-based finance experts told Inside Higher Ed that based on what they learned about Mr Gerami, it is indeed unbelievable that the privately held stocks the university has are anywhere near the amount Mr Gerami claims.
“The probability that Gregory Gerami has stock that could be converted into $239 million or $300 million appears to be about zero,” said Jay Ritter, a finance professor at the University of Florida. “A large value of stock in a privately held company is certainly plausible. However, it depends on the industry and how big the company is.”
He said that hemp growers like Mr Gerami are operating in a crowded, competitive market where it’s difficult to turn big profits, and that Batterson Farms’ “rudimentary website” doesn’t appear to offer any products that aren’t available through other companies. “It just seems to be implausible that a tiny company – I don’t even know if they’ve got sales – could be worth hundreds of millions of dollars.”
At a news conference last Monday, Mr Gerami said he intentionally doesn’t maintain a big online presence to protect his family.
But Rebel Cole, a finance professor at Florida Atlantic University, said that doesn’t make sense for the owner of a multimillion dollar company. “You want press. You want PR. You don’t hide. You can’t make money that way,” he said. “This donation raises more red flags than the CCP raises in Beijing.”
Optics aside, Professor Cole said that because the shares Mr Gerami transferred to Florida A&M are privately held, there’s no way to know if they’re worth the $237 million-plus Mr Gerami claims.
“There’s no market valuation of those shares, so this guy can say ‘I think they’re worth $250 million’ or ‘I think they’re worth a billion,’” Professor Cole said. “We have no idea. These shares may be worth 239 cents.”
While new details may continue to emerge about Mr Gerami, his business and his interactions with other institutions, the largesse he showed FAMU has already morphed into a cautionary tale for university administrators under pressure to raise newsworthy amounts of money.
“This is how not to go about bringing in a big donation,” Professor Cole said, criticising FAMU leadership’s lack of transparency about the gift. “Why would you just dump this at graduation and give this guy the stage, other than letting your ego get in the way?”
This is an edited version of a story that first appeared on Inside Higher Ed.
